Startup grants and the development of academic startup projects during funding: Quasi-experimental evidence from the German ‘EXIST – Business startup grant’

Abstract

Public support programs for (academic) startups are an important component of innovation and technology policy. There are many types of startup policy instrument, one of which is supporting prospective founders with startup grants. The present study contributes to the literature by examining the effectiveness of a specific startup grant entitled ‘EXIST – Business Startup Grant’. This measure is Germany’s largest public startup support program and aims to increase the number of technology-oriented and knowledge-based academic startups. The present research investigates the extent to which products of funded startups, the projects’ business planning, the founders’ skills, the degree of networking, and the uptake of external funding evolve over the duration of the grant. Evidence of the effects on these variables is generated by means of a pipeline-based comparison group design. Findings indicate that the startup grant contributes substantially to the development of the products and the business planning of the funded startups, moderately increases their degree of networking and their uptake of external funding, and slightly improves the skills of the founding team during the funding period. Several robustness checks – including a replication by another type of research design, namely a pre-post comparison – strongly support the findings. Hence it is very likely that the program advances startups in their development and thus contributes to later economic success.